529s technically count towards the Expected Family Contribution (EFC) on the FAFSA, decreasing aid eligibility. If the kid is getting money from the grandparents 529, it counts as gift income, which also goes against EFC. At this point, you're probably saying "I won't tell them about the gift money", well you could also just not tell them you have a 529. Neither the school nor the Department of Ed have any way of knowing you have it.